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“Q3 was marked by progress across a number of key financial and operating metrics,” said
Mr. Pathe added, “Backed by a strong market outlook for nickel and cobalt, we expect to sustain this momentum through the completion of a number of near-term milestones, including the restructuring of our Ambatovy joint venture, completing the drilling of the second well on Block 10 and achieving our production targets for 2017.”
Q3 2017 HIGHLIGHTS
- Sherritt ended the quarter with cash, cash equivalents and short-term investments of
$291.3 million , up$17.1 million fromJune 30, 2017 . - Sherritt and its Ambatovy Joint Venture partners continue to work towards implementation of the previously announced Agreement in Principle that will result in the re-structuring of the Joint Venture and the elimination of approximately
$1.3 billion of non-recourse debt. Closing of the transaction is expected to occur in Q4 of this year. - Sherritt’s operations in
Cuba incurred minimal damages as a result of Hurricane Irma; nickel, cobalt, power, oil and gas production were only moderately impacted due to hurricane readiness and shutdown procedures. - Moa JV Net Direct Cash Cost (NDCC) for nickel was
US$1.94 /lb, representing the lowest total since the fourth quarter of 2004. The decline was driven primarily by high cobalt prices and theUS$0.50 /lb cost savings achieved with the commissioning of the third acid plant at Moa in 2016. - Unit operating costs in
Cuba were$8.98 per barrel of oil, down 4% from$9.31 in Q3 2016. - Unit operating costs for power production were
$16.59 per megawatt hour, down 35% from$25.55 for last year. - Sherritt’s share of production totals from its operations were: 4,049 tonnes of finished nickel at the Moa JV; 3,247 tonnes of finished nickel at Ambatovy; 464 tonnes of finished cobalt at the Moa JV; 335 tonnes of finished cobalt at Ambatovy; 7,658 net working interest barrels of oil equivalent per day and 210 gigawatt hours of electricity.
- Adjusted EBITDA was
$33.8 million , up 194% from$11.5 million in Q3 2016. - Sherritt received
US$32.6 million of Cuban energy payments, includingUS$15.6 million received by Sherritt’s Oil and Gas division andUS$17.0 million received by the Power division from Energas. - Net loss was
$69.5 million , or$0.24 per share outstanding, down from a net loss of$120.8 million , or$0.41 per share outstanding, in Q3 2016.
(1) For additional information see the Non-GAAP measures section of this press release.
| Q3 2017 FINANCIAL HIGHLIGHTS | |||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| $ millions, except per share amount | September 30 | September 30 | Change | September 30 | September 30 | Change | |||||||
| Revenue | 63.3 | 58.5 | 8 | % | $ | 212.5 | $ | 191.8 | 11% | ||||
| Combined Revenue(1) | 234.7 | 184.5 | 27 | % | 693.7 | 579.9 | 20% | ||||||
| Net loss for the period | (69.5 | ) | (120.8 | ) | 42 | % | (244.0 | ) | (272.2 | ) | 10% | ||
| Adjusted EBITDA(1) | 33.8 | 11.5 | 194 | % | 100.2 | 2.6 | 3,754% | ||||||
| Cash provided (used) by continuing operations | 28.7 | 60.3 | (52 | %) | 24.3 | 24.2 | – | ||||||
| Combined free cash flow (1) | 7.3 | 20.3 | (64 | %) | (20.9 | ) | (66.4 | ) | 69% | ||||
| Net loss from continuing operations per share | (0.24 | ) | (0.41 | ) | 41 | % | (0.83 | ) | (0.93 | ) | 11% | ||
| (1) | For additional information, see the Non-GAAP measures section of this release. |
| 2017 | 2016 | |||||
| $ millions, except as otherwise noted, as at | September 30 | December 31 | Change | |||
| Cash, cash equivalents and short term investments | $ | 291.3 | $ | 309.6 | (6 | %) |
| Non-recourse loans and borrowings | 1,324.6 | 1,367.5 | (3 | %) | ||
| Other loans and borrowings | 828.8 | 860.7 | (4 | %) | ||
In Q3 2017, Sherritt generated
Cash, cash equivalents and short-term investments at the end of the third quarter were
During the quarter,
|
Adjusted earnings (loss) from continuing operations (1) |
|||||||||
| 2017 | 2016 | ||||||||
| For the three months ended September 30 | $ millions | $/share | $ millions | $/share | |||||
| Net loss from continuing operations | (69.5 | ) | (0.24 | ) | (120.8 | ) | (0.41 | ) | |
| Adjusting items, net of tax: | |||||||||
| Unrealized foreign exchange (gain) loss | (13.5 | ) | (0.05 | ) | 12.8 | 0.04 | |||
| Other | (1.4 | ) | (0.00 | ) | 3.7 | 0.01 | |||
| Adjusted net loss from continuing operations | (84.4 | ) | (0.29 | ) | (104.3 | ) | (0.34 | ) | |
| 2017 | 2016 | ||||||||
| For the nine months ended September 30 | $ millions | $/share | $ millions | $/share | |||||
| Net loss from continuing operations | (244.0 | ) | (0.83 | ) | (272.2 | ) | (0.93 | ) | |
| Adjusting items, net of tax: | |||||||||
| Impairments | – | – | 8.5 | – | |||||
| Unrealized foreign exchange (gain) loss | (16.4 | ) | (0.06 | ) | (61.6 | ) | (0.21 | ) | |
| Other | (6.5 | ) | (0.02 | ) | (22.7 | ) | (0.08 | ) | |
| Adjusted net loss from continuing operations | (266.9 | ) | (0.90 | ) | (348.0 | ) | (1.21 | ) | |
| (1) | For additional information, see the Non-GAAP measures section of this release. |
The adjusted net loss from continuing operations in the third quarter of 2017 was
| REVIEW OF OPERATIONS | ||||||||||||||||||||||||||
| METALS | ||||||||||||||||||||||||||
| $ millions except as otherwise noted, for the three months ended September 30 | 2017 | 2016 | ||||||||||||||||||||||||
| Moa JV & | Ambatov | Moa JV and | Ambatovy | |||||||||||||||||||||||
|
Fort Site (1) |
JV | Total | Fort Site(1) | JV | ||||||||||||||||||||||
| (50%) | (40%) |
Other (2) |
(50%) | (40%) | Other(2) | Total | Change | |||||||||||||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||||||
| Revenue | $ | 100.7 | $ | 78.0 | $ | 14.1 | $ | 192.8 | $ | 80.6 | $ | 51.0 | $ | 11.4 | $ | 143.0 | 35 | % | ||||||||
| Earnings (loss) from operations | 12.8 | (34.2 | ) | 0.2 | (21.2 | ) | (4.0 | ) | (38.5 | ) | 0.3 | (42.2 | ) | 50 | % | |||||||||||
| Adjusted EBITDA(3) | 23.9 | 1.3 | 0.2 | 25.4 | 7.5 | (4.5 | ) | 0.3 | 3.3 | 670 | % | |||||||||||||||
| Cash provided (used) by operations | 17.6 | (8.9 | ) | (1.7 | ) | 7.0 | 25.6 | (11.4 | ) | (5.4 | ) | 8.8 | (20 | %) | ||||||||||||
| Free cash flow(3) | 14.5 | (13.8 | ) | (1.7 | ) | (1.0 | ) | 17.3 | (21.8 | ) | (5.4 | ) | (9.9 | ) | 90 | % | ||||||||||
| PRODUCTION VOLUMES (tonnes) | ||||||||||||||||||||||||||
| Mixed Sulphides | 4,555 | 3,406 | – | 7,961 | 4,496 | 3,821 | – | 8,317 | (4 | %) | ||||||||||||||||
| Finished Nickel | 4,049 | 3,247 | – | 7,296 | 4,295 | 3,669 | – | 7,964 | (8 | %) | ||||||||||||||||
| Finished Cobalt | 464 | 335 | – | 799 | 489 | 270 | – | 759 | 5 | % | ||||||||||||||||
| Fertilizer | 60,033 | 10,407 | – | 70,440 | 66,893 | 12,106 | – | 78,999 | (11 | %) | ||||||||||||||||
| NICKEL RECOVERY (%) | 87 | % | 77 | % | 89 | % | 81 | % | ||||||||||||||||||
| SALES VOLUMES (tonnes) | ||||||||||||||||||||||||||
| Finished Nickel | 4,018 | 3,817 | – | 7,835 | 4,218 | 3,167 | – | 7,385 | 6 | % | ||||||||||||||||
| Finished Cobalt | 447 | 344 | – | 791 | 418 | 229 | – | 647 | 22 | % | ||||||||||||||||
| Fertilizer | 32,080 | 11,120 | – | 43,200 | 30,167 | 9,126 | – | 39,293 | 10 | % | ||||||||||||||||
| AVERAGE EXCHANGE RATE (CAD/US) | 1.253 | 1.305 | (4 | %) | ||||||||||||||||||||||
| AVERAGE REFERENCE PRICES (US$ per pound) | ||||||||||||||||||||||||||
| Nickel | $ | 4.78 | $ | 4.66 | 3 | % | ||||||||||||||||||||
| Cobalt | 28.84 | 12.33 | 134 | % | ||||||||||||||||||||||
|
AVERAGE-REALIZED PRICES (3) |
||||||||||||||||||||||||||
| Nickel ($ per pound) | $ | 6.02 | $ | 5.77 | $ | – | $ | 5.90 | $ | 5.91 | $ | 5.85 | $ | – | $ | 5.88 | – | |||||||||
| Cobalt ($ per pound) | 34.89 | 36.16 | – | 35.44 | 15.20 | 17.04 | – | 15.78 | 125 | % | ||||||||||||||||
| Fertilizer ($ per tonne) | 309 | 160 | – | 269 | 288 | 161 | – | 260 | 3 | % | ||||||||||||||||
|
UNIT OPERATING COSTS (3) (US$ per pound) |
||||||||||||||||||||||||||
| Nickel – net direct cash cost | $ | 1.94 | $ | 4.27 | $ | – | $ | 3.08 | $ | 3.55 | $ | 4.67 | – | 4.03 | (24 | %) | ||||||||||
| SPENDING ON CAPITAL | ||||||||||||||||||||||||||
| Sustaining | $ | 3.0 | $ | 13.0 | $ | – | $ | 16.0 | $ | 6.9 | $ | 9.5 | $ | – | $ | 16.4 | (2 | %) | ||||||||
| Expansion | – | – | – | – | 4.3 | – | – | 4.3 | (100 | %) | ||||||||||||||||
| $ | 3.0 | $ | 13.0 | $ | – | $ | 16.0 | $ | 11.2 | $ | 9.5 | $ | – | $ | 20.7 | (15 | %) | |||||||||
| (1) | Includes results for certain 100% owned assets at Fort Saskatchewan plant. |
| (2) | Includes results for Sherritt’s marketing organizations for certain Ambatovy and Moa Joint Venture sales. |
| (3) | For additional information, see the Non-GAAP measures section of this release. |
| $ millions, except as otherwise noted, for the nine months ended September 30 | 2017 | 2016 | |||||||||||||||||||||||
| Moa JV and | Ambatovy | Moa JV | Ambatovy | ||||||||||||||||||||||
|
Fort Site (1) |
JV | and Fort Site(1) | JV | ||||||||||||||||||||||
| (50%) | (40%) |
Other (2) |
Total | (50%) | (40%) | Other(2) | Total | Change | |||||||||||||||||
| FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||
| Revenue | $ | 294.1 | $ | 221.1 | $ | 40.1 | $ | 555.3 | $ | 246.8 | $ | 176.6 | $ | 33.1 | $ | 456.5 | 22 | % | |||||||
| Earnings (loss) from operations | 11.4 | (101.8 | ) | 0.9 | (89.5 | ) | (20.8 | ) | (135.9 | ) | 0.6 | (156.1 | ) | 43 | % | ||||||||||
| Adjusted EBITDA(3) | 48.4 | 7.9 | 0.9 | 57.2 | 14.0 | (31.4 | ) | 0.6 | (16.8 | ) | 440 | % | |||||||||||||
| Cash provided (used) by operations | 25.8 | (23.3 | ) | 3.5 | 6.0 | 14.2 | (33.8 | ) | (0.2 | ) | (19.8 | ) | 130 | % | |||||||||||
| Free cash flow(3) | 12.5 | (34.9 | ) | 3.5 | (18.9 | ) | (13.3 | ) | (45.3 | ) | (0.2 | ) | (58.8 | ) | 68 | % | |||||||||
| PRODUCTION VOLUMES (tonnes) | |||||||||||||||||||||||||
| Mixed Sulphides | 13,207 | 11,507 | – | 24,714 | 13,249 | 12,235 | – | 25,484 | (3 | %) | |||||||||||||||
| Finished Nickel | 11,628 | 10,507 | – | 22,135 | 12,682 | 11,731 | – | 24,413 | (9 | %) | |||||||||||||||
| Finished Cobalt | 1,336 | 928 | – | 2,264 | 1,465 | 905 | – | 2,370 | (4 | %) | |||||||||||||||
| Fertilizer | 181,759 | 33,107 | – | 214,866 | 195,352 | 37,258 | – | 232,610 | (8 | %) | |||||||||||||||
| NICKEL RECOVERY (%) | 87 | % | 82 | % | 88 | % | 86 | % | |||||||||||||||||
| SALES VOLUMES (tonnes) | |||||||||||||||||||||||||
| Finished Nickel | 11,550 | 11,092 | – | 22,642 | 12,427 | 11,909 | – | 24,336 | (7 | %) | |||||||||||||||
| Finished Cobalt | 1,303 | 995 | – | 2,298 | 1,359 | 921 | – | 2,280 | 1 | % | |||||||||||||||
| Fertilizer | 127,350 | 33,902 | – | 161,252 | 121,827 | 36,997 | – | 158,824 | 2 | % | |||||||||||||||
| AVERAGE EXCHANGE RATE (CAD/USD) | 1.307 | 1.322 | (1 | %) | |||||||||||||||||||||
| AVERAGE REFERENCE PRICES (US$ per pound)(3) | |||||||||||||||||||||||||
| Nickel | $ | 4.55 | $ | 4.18 | 9 | % | |||||||||||||||||||
| Cobalt | 24.84 | 11.39 | 118 | % | |||||||||||||||||||||
|
AVERAGE-REALIZED PRICES (3) |
|||||||||||||||||||||||||
| Nickel ($ per pound) | $ | 5.94 | $ | 5.92 | $ | – | $ | 5.93 | $ | 5.38 | $ | 5.31 | $ | – | $ | 5.35 | 11 | % | |||||||
| Cobalt ($ per pound) | 30.85 | 31.89 | – | 31.30 | 14.09 | 15.04 | – | 14.47 | 116 | % | |||||||||||||||
| Fertilizer ($ per tonne) | 367 | 166 | – | 324 | 397 | 165 | – | 343 | (6 | %) | |||||||||||||||
| UNIT OPERATING COSTS (US$ per pound)(3) | |||||||||||||||||||||||||
| Nickel – net direct cash cost | $ | 2.53 | $ | 3.96 | $ | – | $ | 3.23 | $ | 3.30 | $ | 4.79 | $ | – | $ | 4.03 | (20 | %) | |||||||
| SPENDING ON CAPITAL | |||||||||||||||||||||||||
| Sustaining | $ | 13.2 | $ | 34.2 | $ | – | $ | 47.4 | $ | 17.9 | $ | 14.1 | $ | – | $ | 32.0 | 48 | % | |||||||
| Expansion | – | – | – | – | 12.4 | – | – | 12.4 | (100 | %) | |||||||||||||||
| $ | 13.2 | $ | 34.2 | $ | – | $ | 47.4 | $ | 30.3 | $ | 14.1 | $ | – | $ | 44.4 | (25 | %) | ||||||||
| (1) | Includes results for certain 100% owned assets at Fort Saskatchewan plant. |
| (2) | Includes results for Sherritt’s marketing organizations for certain Ambatovy and Moa Joint Venture sales. |
| (3) | For additional information, see the Non-GAAP measures section of this release. |
METAL MARKETS
Nickel
Q3 2017 saw a nickel price rally for much of the quarter. Starting at
Q3’s average nickel reference price of
The recent increase in nickel prices has been driven by a number of factors affecting both supply and demand market conditions. Most significant are the strong demand for Chinese stainless steel and growing concerns on the supply side due to the announced shutdown of a major laterite nickel operation in
Global finished nickel stocks continued to slowly contract in Q3 and the refined nickel market is expected to be in deficit in 2017. A consistent decline in both LME and SHFE stocks is needed, however, for a sustained recovery of nickel prices.
In the short-term, uncertain geopolitical conditions in
Cobalt
Cobalt prices experienced continued growth in the third quarter with the Metal Bulletin Low Grade Mean averaging at
Tight supply conditions and rising demand for battery materials led by the electric vehicle industry continue to drive cobalt prices upward.
In the short term, the risk of cobalt substitution in battery production is considered low given its unique energy transference properities. While battery manufacturers are exploring alternatives to cobalt, the likely beneficiary of any substitution is expected to be nickel.
The strength in cobalt pricing is further supported by the limited number of copper and nickel projects with significant cobalt by-products and the political risks in the
Overall, deficits are expected to continue in the cobalt market for next few years. In addition to demand from the industrial end users, financial investors are also driving the bullish trend in cobalt pricing by stockpiling inventory, further impacting the expected supply deficit.
Moa Joint Venture (50% interest) and Fort Site (100%)
The Moa JV produced 4,049 tonnes of finished nickel in Q3 2017, down from 4,295 tonnes produced in Q3 last year even though mixed sulphides production was higher this year by 59 tonnes. The decline was largely due to shipment delays of mixed sulphides to the refinery in
The nickel to cobalt ratio of mixed sulphides produced at Moa in Q3 was strong and comparable to the ratio produced in Q2 of this year. This high ratio is expected to be consistent for the balance of the year based on the current mine plan sequencing.
Q3 2017 revenue for the Moa JV and the Fort Site totaled
Moa’s NDCC of
Cash provided by operations in Q3 2017 totaled
Moa’s sustaining capital spending in Q3 2017 was
Based on year-to-date performance and near-term visibility, the Moa JV is expected to reach its production targets for 2017 but has lowered its estimated NDCC for nickel to between
Ambatovy Joint Venture (40% interest)
Finished nickel production at Ambatovy in Q3 2017 was 3,247 tonnes, down 12% from the comparable period of 2016. The decline was due to a number of developments that impacted asset plant reliability. Among these were the poor reliability of the pressure acid leach circuit, an unplanned shutdown to address hydrogen sulphide emissions from the sulphide precipitation circuits and unplanned maintenance of the counter current decantation circuit. Finished nickel production was also impacted by a scheduled full asset plant shutdown in September and lower nickel recoveries initiated by a change in ore composition. Maintenance activities completed in Q3 as well as replacement of equipment, including rubber-lined spools, are expected to improve asset plant reliability and production stability over time.
Finished cobalt production in Q3 2017 was 335 tonnes, up 24% from 270 tonnes for the same period of 2016. The increase was largely due to a higher cobalt to nickel ratio in the ore processed.
Despite lower production volumes, NDCC for nickel at Ambatovy in Q3 2017 declined by 9% to
Spending on sustaining capital in Q3 2017 was
Based on production totals on a year to date basis and near-term visibility, Ambatovy has updated its production targets for 2017, and expects to produce between 36,000 and 39,000 tonnes of finished nickel and between 3,300 and 3,600 tonnes of finished cobalt. Its estimated NDCC for nickel remains unchanged at between
Status of Ambatovy Joint Venture Restructuring
The Ambatovy Joint Venture partners continue to work towards implementation of the previously announced Agreement in Principle, with closing expected to occur in Q4 of this year.
| OIL AND GAS | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| $ millions, except as otherwise noted | September 30 | September 30 | Change | September 30 | September 30 | Change | |||||||||
| FINANCIAL HIGHLIGHTS | |||||||||||||||
| Revenue | $ | 29.9 | $ | 27.3 | 10 | % | $ | 99.3 | $ | 78.0 | 27 | % | |||
| Earnings (loss) from operations | 5.8 | (7.4 | ) | 178 | % | 25.7 | (19.1 | ) | 235 | % | |||||
| Adjusted EBITDA(1) | 14.0 | 11.1 | 26 | % | 51.4 | 24.0 | 114 | % | |||||||
| Cash provided by operations | 7.9 | 54.5 | (86 | %) | 33.1 | 65.0 | (49 | %) | |||||||
| Free cash flow(1) | 0.7 | 46.5 | (98 | %) | 18.8 | 47.1 | (60 | %) | |||||||
| PRODUCTION AND SALES (bopd) | |||||||||||||||
| Gross working-interest (GWI) – Cuba | 13,831 | 14,709 | (6 | %) | 14,524 | 15,782 | (8 | %) | |||||||
| Total net working-interest (NWI) | 7,658 | 8,719 | (12 | %) | 8,446 | 9,925 | (15 | %) | |||||||
| AVERAGE EXCHANGE RATE (CAD/USD) | 1.253 | 1.305 | (4 | %) | 1.307 | 1.322 | (1 | %) | |||||||
| AVERAGE REFERENCE PRICE (US$ per barrel) | |||||||||||||||
| West Texas Intermediate (WTI) | $ | 48.21 | $ | 44.90 | 7 | % | $ | 49.29 | $ | 41.42 | 19 | % | |||
| Gulf Coast Fuel Oil No. 6 | 46.42 | 34.88 | 33 | % | 45.10 | 29.13 | 55 | % | |||||||
| Brent | 52.51 | 45.57 | 15 | % | 51.66 | 41.58 | 24 | % | |||||||
|
AVERAGE-REALIZED PRICE (1) (NWI) |
|||||||||||||||
| Cuba ($ per barrel) | $ | 42.10 | $ | 32.88 | 28 | % | $ | 42.63 | $ | 27.28 | 56 | % | |||
|
UNIT OPERATING COSTS (1) (GWI) |
|||||||||||||||
| Cuba ($ per barrel) | $ | 8.98 | $ | 9.31 | (4 | %) | $ | 9.19 | $ | 9.39 | (2 | %) | |||
|
SPENDING ON CAPITAL (2) |
|||||||||||||||
| Development, facilities and other | $ | 0.9 | $ | 0.8 | 13 | % | $ | (0.3 | ) | $ | 8.5 | (104 | %) | ||
| Exploration | 6.6 | 7.3 | (10 | %) | 12.5 | 9.2 | 36 | % | |||||||
| $ | 7.5 | $ | 8.1 | (7 | %) | $ | 12.2 | $ | 17.7 | (31 | %) | ||||
| (1) | For additional information, see the Non-GAAP measures section of this release. |
| (2) | Spending on capital includes accruals. |
Gross working-interest oil production in Q3 2017 was 13,831 barrels of oil per day, down from 14,709 barrels of oil per day (bopd) for the comparable period of 2016. The decrease was primarily due to natural reservoir declines, the absence of new development drilling and the impact of Hurricane Irma, which temporarily curtailed production due to standard storm safety and shutdown procedures.
Revenue in Q3 2017 was
Cost-recovery oil production in
Unit operating costs in Q3 2017 in
Capital spending in Q3 2017 totaled
Given its performance on a year-to-date basis, the Oil and Gas division has increased its production targets for 2017, and expects to produce between 13,000 and 14,000 GWI bopd in
| POWER | ||||||||||||||
| For the three months ended | For the nine months ended | |||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
| $ millions (33 ⅓% basis), except as otherwise noted | September 30 | September 30 | Change | September 30 | September 30 | Change | ||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||||
| Revenue | $ | 12.2 | $ | 14.4 | (15 | %) | $ | 39.2 | $ | 44.9 | (13 | %) | ||
| Earnings (loss) from operations | 1.5 | (2.0 | ) | 175 | % | 5.8 | (4.0 | ) | 245 | % | ||||
| Adjusted EBITDA(1) | 7.5 | 6.6 | 14 | % | 24.6 | 22.1 | 11 | % | ||||||
| Cash provided by operations | 18.4 | 5.5 | 235 | % | 39.1 | 11.3 | 246 | % | ||||||
| Free cash flow(1) | 18.2 | 5.1 | 257 | % | 37.7 | 10.7 | 252 | % | ||||||
| PRODUCTION AND SALES | ||||||||||||||
| Electricity (GWh) | 210 | 226 | (7 | %) | 647 | 670 | (3 | %) | ||||||
|
AVERAGE-REALIZED PRICE (1) |
||||||||||||||
| Electricity ($/MWh) | $ | 53.10 | $ | 55.47 | (4 | %) | $ | 55.50 | $ | 56.05 | (1 | %) | ||
|
UNIT OPERATING COSTS (1) ($/MWh) |
||||||||||||||
| Base | 14.19 | 17.86 | (21 | %) | 15.18 | 16.13 | (6 | %) | ||||||
| Non-base(2) | 2.40 | 7.69 | (69 | %) | 2.82 | 6.21 | (55 | %) | ||||||
| 16.59 | 25.55 | (35 | %) | 18.00 | 22.34 | (19 | %) | |||||||
| NET CAPACITY FACTOR (%) | 65 | 69 | (6 | %) | 67 | 70 | (4 | %) | ||||||
|
SPENDING ON CAPITAL AND SERVICE CONCESSION ARRANGEMENTS (3) |
||||||||||||||
| Sustaining | $ | 0.2 | $ | 0.3 | (33 | %) | $ | 1.4 | $ | 0.6 | 133 | % | ||
| Service concession arrangements | – | 0.9 | (100 | %) | – | 4.5 | (100 | %) | ||||||
| $ | 0.2 | $ | 1.2 | (83 | %) | $ | 1.4 | $ | 5.1 | (73 | %) | |||
| (1) | For additional information see the Non-GAAP measures section of this release. |
| (2) | Costs incurred at the Boca de Jaruco and Puerto Escondido facilities that otherwise would have been capitalized if these facilities were not accounted for as service concession arrangements. |
| (3) | Spending on capital includes accruals. |
Power production in Q3 2017 was 210 gigawatt hours (“GWh”) of electricity, down 7% from 226 GWh for the comparable period of 2016. The decline was largely due to reduced gas supply and the impact of Hurricane Irma.
Average realized prices in Q3 2017 declined to
Revenue in Q3 2017 totaled
Cash flow from operations grew by 235% to
Unit operating cost in Q3 2017 was
Total capital spending in Q3 2017 was
2017 STRATEGIC PRIORITIES
The table below lists Sherritt’s Strategic Priorities for 2017. The 2017 Strategic Priorities reflect the continuing cautious commodity price outlook and the Corporation’s responsibility to preserve liquidity, continue to drive down costs, improve organizational effectiveness and execute rational capital allocation plans. Sherritt’s purpose, originally communicated in 2014, continues to be a low-cost nickel producer that creates sustainable prosperity for our employees, investors and communities.
| Strategic Priorities | 2017 Targets | Status | ||
|
PRESERVE LIQUIDITY AND BUILD BALANCE SHEET STRENGTH |
|
Finalize long-term Ambatovy equity and funding structure | |
Agreement in principle reached with the Ambatovy project partners, closing of the transaction is expected in Q4 2017. |
| |
Optimize working capital and receivables collection | |
Timing of working capital changes at the Fort Site fluctuate quarter-to-quarter. Management continues to take action to expedite Cuban energy receipts. In Q3, Sherritt received $32.6 million of Cuban energy payments. | |
| |
Operate Metals and Power businesses to be free cash flow neutral or better | |
On a year-to-date basis, Oil and Gas and Power divisions continued to generate positive free cash flow. The Moa JV has generated sufficient operating cash flow to repay a portion of the working capital facility. | |
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OPTIMIZE OPPORTUNITIES IN CUBAN ENERGY BUSINESS |
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Determine future capital allocation based on results from first two wells drilled on Block 10 | |
The results from the first well have provided constructive data to optimize the drilling of the second well, again targeting the Lower Veloz formation. Drill results from the second well are expected in Q4 2017. |
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UPHOLD GLOBAL OPERATIONAL LEADERSHIP IN FINISHED NICKEL LATERITE PRODUCTION |
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Further reduce NDCC at Moa and Ambatovy towards the goal of achieving or remaining in the lowest quartile of global nickel cash costs | |
Q3 NDCC of US$1.94/lb at the Moa JV is the lowest since Q4 2004. Moa’s NDCC ranked it within the lowest cost quartile for the second consecutive quarter. Ambatovy’s Q3 NDCC of US$4.27/lb marked an improvement from last year, but was below expectations due to lower production and higher maintenance costs. |
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Increase Ambatovy production and predictability over 2016 | |
Ambatovy year-to-date production has experienced unanticipated challenges. Initiatives, such as replacing certain equipment, are being implemented to improve asset reliability. | |
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Achieve peer leading performance in environmental, health, safety and sustainability | |
Sherritt was named as one of Corporate Knights’ 2017 Future 40 Responsible Corporate Leaders in Canada, based on sustainability disclosures. Sherritt has been supporting ongoing Hurricane Irma recovery efforts in Cuba, and promoting good hygiene in communities suffering from pneumonic plague in Madagascar. Sherritt was also named a finalist for the Canadian Nature Museum’s “Nature Inspiration Award,” largely for its conservation work in Madagascar, and continues implementing the Mining Association of Canada’s Towards Sustainable Mining program. |
OUTLOOK
2017 PRODUCTION, UNIT OPERATING COST AND CAPITAL SPENDING GUIDANCE
The guidance for 2017 reflects updates announced previously on
| Production volumes, unit operating costs and spending on capital | Guidance at 2017 June 30 |
Actual 2017 September 30 |
Updated Guidance at 2017 September 30 |
|
| Production volumes | ||||
| Nickel, finished (tonnes, 100% basis) | ||||
| Moa Joint Venture | 31,500-32,500 | 23,256 | Unchanged | |
| Ambatovy Joint Venture | 40,000-43,000 | 26,268 | 36,000-39,000 | |
| Total | 71,500-75,500 | 49,524 | 67,500-71,500 | |
| Cobalt, finished (tonnes, 100% basis) | ||||
| Moa Joint Venture | 3,500-3,800 | 2,672 | Unchanged | |
| Ambatovy Joint Venture | 3,600-3,900 | 2,320 | 3,300-3,600 | |
| Total | 7,100-7,700 | 4,992 | 6,800-7,400 | |
| Oil – Cuba (gross working-interest, bopd) | 11,500-12,500 | 14,524 | 13,000 – 14,000 | |
| Oil and Gas – All operations (net working-interest, boepd) | 6,400-7,000 | 8,446 | 7,500 – 8,000 | |
| Electricity (GWh, 33⅓% basis) | 850-900 | 647 | Unchanged | |
| Unit operating costs | ||||
| NDCC (US$ per pound) | ||||
| Moa Joint Venture | 2.80-3.30 | 2.53 | 2.50-2.75 | |
| Ambatovy Joint Venture | 3.10-3.70 | 3.96 | Unchanged | |
| Total | 2.95-3.35 | 3.23 | 2.83-3.26 | |
| Oil and Gas – Cuba (unit operating costs, $ per barrel) | 11.00-12.00 | 9.19 | 10.00 – 10.50 | |
| Electricity (unit operating cost, $ per MWh) | 18.75-19.50 | 18.00 | Unchanged | |
| Spending on capital (US$ millions) | ||||
| Metals – Moa Joint Venture (50% basis), Fort Site (100% basis) (1) | US$28 (CDN$38) | US$10 (CDN$13) | US$19 (CDN$25) | |
| Metals – Ambatovy Joint Venture (40% basis) | US$45 (CDN$61) | US$26 (CDN$34) | US$38 (CDN$50) | |
| Oil and Gas | US$35 (CDN$47) | US$9 (CDN$12) | Unchanged | |
| Power (33⅓% basis) | US$1 (CDN$2) | US$1 (CDN$1) | Unchanged | |
| Spending on capital (excluding Corporate) | US$109 ($CDN148) | US$46 (CDN$60) | US$93 (CDN$122) | |
| (1) | Spending is 50% of US$expenditures for Moa JV and 100% expenditures for Fort Site fertilizer and utilities. |
NON-GAAP MEASURES
The Corporation uses combined results, Adjusted EBITDA, average-realized price, unit operating cost, and adjusted operating cash flow, and free cash flow to monitor the performance of the Corporation and its operating divisions and believes these measures enable investors and analysts to compare the Corporation’s financial performance with its competitors and evaluate the results of its underlying business. These measures do not have a standard definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. As these measures do not have a standardized meaning, they may not be comparable to similar measures provided by other companies.
CONFERENCE CALL AND WEBCAST
Sherritt will hold its quarterly conference call and webcast tomorrow at
| Conference Call and Webcast: | October 25, 2017, 9:00 a.m. ET |
| North American callers, please dial: | 1-800-274-0251 |
| International callers, please dial: | 416-640-5944 |
| Live webcast: | www.sherritt.com |
An archive of the webcast will also be available on the website. The conference call will be available for replay until
COMPLETE FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS
Sherritt’s complete condensed consolidated financial statements and MD&A for the three and nine months ended
ABOUT SHERRITT
Sherritt, which is celebrating its 90th anniversary in 2017, is the world leader in the mining and refining of nickel from lateritic ores with projects and operations in
Source: Sherritt Investor Relations
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements. Forward-looking statements can generally be identified by the use of statements that include such words as “believe”, “expect”, “anticipate”, “intend”, “plan”, “forecast”, “likely”, “may”, “will”, “could”, “should”, “suspect”, “outlook”, “potential”, “projected”, “continue” or other similar words or phrases. Specifically, forward-looking statements in this document include, but are not limited to, statements set out in the “Outlook” sections of this press release and certain expectations regarding production volumes, operating costs and capital spending; supply, demand and pricing outlook in the nickel and cobalt markets; sources of funding for the Moa Joint Venture; restructuring of the Ambatovy Joint Venture shareholder interests and future financing arrangements at the Ambatovy Joint Venture; results of discussions regarding timing of ongoing Cuban payments; drill results on exploration wells; joint venture environmental rehabilitation costs and amounts of certain other commitments.
Forward-looking statements are not based on historic facts, but rather on current expectations, assumptions and projections about future events. By their nature, forward-looking statements require the Corporation to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that those assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections.
The Corporation cautions readers of this press release not to place undue reliance on any forward-looking statement as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to changes in the global price for nickel, cobalt, oil and gas or certain other commodities, share-price volatility, level of liquidity and access to capital resources, access to financing, risk of future non-compliance with debt restrictions and covenants; risks associated with the Corporation’s joint venture partners; discrepancies between actual and estimated production; variability in production at Sherritt’s operations in
The Corporation may, from time to time, make oral forward-looking statements. The Corporation advises that the above paragraph and the risk factors described in this press release and in the Corporation’s other documents filed with the Canadian securities authorities should be read for a description of certain factors that could cause the actual results of the Corporation to differ materially from those in the oral forward-looking statements. The forward-looking information and statements contained in this press release are made as of the date hereof and the Corporation undertakes no obligation to update publicly or revise any oral or written forward-looking information or statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement.
For further investor information contact:
Telephone: 416.935.2451
Toll-free: 1.800.704.6698
E-mail: investor@sherritt.com
www.sherritt.com